GLOBAL - Shareholder activism is not seen as a fiduciary responsibility by most pension funds, with more than a third believing it is only a side issue.
This was the finding of Global Pensions’ panel of 100 funds worldwide, representing US$2trn in assets.
Pension funds appear split over the importance of engaging with the companies in which they invest.
While 46% of panelists said shareholder activism was “very important”, 37% said it was “only a side issue”. A minority (13%) viewed it as “top priority” and a fiduciary responsibility, while 4% answered that it was “of no consequence at all”.
However, a combined total of 59% saw it as a fiduciary responsibility or regarded it as very important. The Myners’ Review of Institutional Investment in the UK, commissioned by the chancellor of the Exchequer in the 2000 Budget, found there was a lack of active intervention by pension funds in companies they invested in, even where there was a reasonable expectation that this would enhance the value of investments.
Darren Check, director of institutional relations at Schiffrin & Barroway, claimed attitudes were changing: “46% in the very important column is impressive and encouraging. Had this survey been taken five years ago, I think you would have had maybe 5% giving it top priority and 20% saying it is very important.
“These numbers will keep coming up towards it being important, but one must remember that many funds will never see far past the belief that their ultimate responsibility is the highest return possible with minimal regard to other factors such as corporate governance and social responsibility.”
In the US, the Employment Retirement Income Security
Act 1974 (ERISA) does not provide an express obligation on trustees and fund managers to exercise their rights as shareholders, however the obligation forms an intrinsic part of the wider fiduciary duties set out in the legislation.
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